Solar industry fights utility’s big solar project

photo: Southern California Edison

When Southern California Edison unveiled plans to install 250 megawatts’ worth of solar panels on warehouse roofs back in March, it was hailed as a ground-breaking move. In one fell swoop, the giant utility would cut the cost of photovoltaic power, expand the solar market and kick-start efforts to transform untold acres of sun-baked commercial roof space into mini-power plants.

There’s just one problem: the solar industry is fighting the billion-dollar plan. In briefs filed with the California Public Utilities Commission, solar companies, industry trade groups and consumer advocates argue that allowing a utility to own and operate such massive green megawattage will crowd out competitors who can’t hope to compete with a project financed by Edison’s ratepayers. (In California, shareholders of investor-owned utilities are guaranteed a rate of return for approved projects, while utility customers bear a portion of the costs in the form of higher rates.)

The five-year plan “would establish SCE as the monopoly developer of commercial-scale distributed solar in its service territory,” wrote Arno Harris, CEO of Recurrent Energy, a San Francisco company that sells solar electricity to commercial customers. “This would irreparably impair the development of a competitive solar industry.”

Southern California Edison (EIX) is the first utility in the United States to propose such a “distributed generation” scheme and the dispute is being watched closely as a test case for the viability of producing renewable electicity from hundreds of millions of square feet of commercial rooftops. Such systems can be plugged directly into existing transmission lines and tend to generate the most solar power when electricity demand spikes – typically on summer afternoons when people crank their air conditioners. Having such green energy on tap would save utilities from having to build expensive and planet-warming fossil fuel-powered “peaker plants” that sit idle except when demand suddenly rises.

Even critics hail Edison’s move as “bold” and “visionary” and no one disputes that in California the development of big rooftop solar has lagged. For instance, the state’s $3.3 billion “million solar roofs” initiative is designed to put smaller-scale solar panels on homes and businesses and provides generous rebates for systems under 1 megawatt. At the other end of the scale, the state’s big utilities have been signing contracts to buy electricity from solar thermal power plants to be built in the desert. Left out of the subsidy game are incentives for the 1-to-2 megawatt arrays well-suited for commercial buildings.

Southern California Edison says it’s filling that gap and will energize the solar industry, not crush it. The utility plans to lease 65 million square feet of commercial rooftop space in the “Inland Empire” region of Southern California for solar arrays that would generate enough electricity to power 162,000 homes.

“SCE’s financial stability and business reputation will increase the probability that 250 MW of solar PV systems will be available to meet the state’s solar rooftop goals over the next five years,” the utility’s attorneys wrote in a brief filed with the utilities commission, which must approve the program. “In so doing, a solar PV program can improve efficiencies … to reduce costs and jump start the competitiveness of solar PV for widespread application on California roofs.”

There’s no doubt the program will be a boon for solar module makers. For instance, thin-film solar cell company First Solar (FSLR) is supplying 33,000 panels for the program’s first project, a 600,000-square-foot roof array in the inland city of Fontana. However, Southern California Edison intends to contract for union labor to install the solar systems and tap its own capital and a rate hike to finance the project. That won’t leave many opportunities for solar installers and financiers like SunPower (SPWR), SunEdison and MMA Renewable Ventures (MMA).

“Even though this program is kind of taking bread out of our own mouth, the demand for solar will keep going up,” says Mark McLanahan, senior vice president of corporate development at MMA Renewable Ventures, a San Francisco firm that finances commercial solar arrays.

“What they have announced is extremely visionary,” McLanahan tells Green Wombat. “It’s game changing and opens up whole new realms of what solar can do. That’s exciting.” On the other hand, he says, “It’s certainly possible that a young, growing industry that is pretty fragmented could be hurt by this rather than helped.”

A solution advanced by some solar industry critics is for Southern California Edison to open up the entire program to competitive bidding, not just the procurement of solar panels. The utility vehemently opposes the idea, arguing it would work against the economies of scale it says it can bring to the program.

Whether regulators will approve Southern California Edison’s request for a rate hike to pay for the initiative – and at electricity rates that are significantly higher than those set for other solar programs – remains to be seen. The commission’s own ratepayer advocate has questioned whether utility customers will get their money’s worth.

The utilities commission is unlikely to issue a final decision until next year. In the meantime, you can bet the state’s other big utilities – PG&E (PCG) and San Diego Gas & Electric (SRE) – and solar companies will be watching to see whether the sky’s the limit for big rooftop solar or whether a ceiling is about to be placed on the industry’s ambitions.

Are the arguments from companies which are selling solar generated power? (I.E. Company X owns ten megawatts of Solar panel capacity and sells it to the grid) or companies which sell solar power components, (Solar panels, harnesses etc…) If there is energy there, heating buildings and increasing AC costs, that could be harnessed without negative side effects such as polluting the fastes way there is the best for the overall economy. Huge monopolies such as SCE are generally due to government regulation that allows them to become huge. They are inherently ineffecient (based on governmental processes) in the same way that government is inherently ineffecient and will collapse if the regulations which allow their existence are removed, however they leave behind valuable infrastructure that the free market is able to distribute and value. Let it happen, the US needs every penny we have, not to be pouring our wealth offshore just to waste what we buy (Oil, cheap crap from China)

Chris from Denver – very intelligent comment. I don’t have solar on my home because it would cost $50k (after government subsidies which us U.S. TAXPAYERS pay for), that I don’t have and would still need grid-back-up. Does that mean I hate America? Your ignorance and inflammatory language is not helpful to the debate.

This is where it gets complicated. We need sustainable renewable energy, everyone agrees – no arguments.

The issue is if the energy company gets complete control using taxpayer dollar to set it in motion then we pay for it now and in the future when they raise the rates.

We also shut out competitive products from trying to make a living. I surely do not have all the answers or the legal knowhow to solve the issue.

What I do understand is that the utilities cannot strip the earth to get oil, then grab the sun and sell it back to us when in reality we all own it originally.

There needs to be a rational here to move forward on sustainable renewable energy and keep it controlled by the consumer not the power companies, especially when they use our dollars to develop the project.

[…the utility’s attorneys wrote in a brief filed with the utilities commission, which must approve the program. “In so doing, a solar PV program can improve efficiencies … to reduce costs and jump start the competitiveness of solar PV for widespread application on California roofs.”]

This program will in no way improve PV efficiencies. Lawyers lose credibility when they say ignorant things.

They need to adapt. They need to not hinder progress. Amazing laptops with 100x the power and amazing features are now cheaper than the original basic function calculators from the 70’s. Prices come down as more and more people buy the technology.

Small solar companies will need to adapt. They can’t claim to be all about the environment and only concerned about the green in their pockets.

Surprise! Politicians & Edison are in bed together. This will still be helpful for pushing solar panels towards comodity status.

Expect them to gain commodity status only when China starts supplying them. American and European companies have demonstrated time and time again they are too greedy to accept anything less than a profit margin of 1000%. And if they have a design that barely works but sells, that is more than good enough to stifle any further innovation. Just like oil and gas today.

Competitors should stop whining and design solar panels with great enough solar conversion efficiency to be useful in the northeast during winter months. That’s when we know’ll we’ll have made it.

This is the best idea I have heard for getting solar to everyone. By mass distribution of solar panels the amount of electrical generation will be so much more than just large solar farms in the desert. What is your thoughts of the power companies in New England doing the same this so we can stop the buring of millions of gallons burned daily during the winter in oil burning furnaces? Electric heaters powered by solar sounds like a quick easy solution. Thoughts?

I say to all the litigators, go build your own solar plants and take on all the risks. If you are successful the California utilities will be forced to buy your electricity due to the 20% renewable energy mandate. Just remember what you wish for, you just might get it. And when the solar producers have to pay out big bucks because they cannot meet the guarantees they have in their Power Purchase Agreements with the utilities, the solar companies will be crying a river.

The idea of giving First Solar every single government contract ralated to solar power is the biggest problem – they are a company built on German subsidies and now are moving to survive on the backs of American subsidies. Every industrial solar producer should be give a small scale project to produce – with a project outline and budget defined by edison – that would least open up the competition and produce the incentive for innovation and increased efficiency. Putting all of our solar eggs in one basket will stifle the market in traditional american strong arm the market style. Having a public utility develop large solar programs is not the problem – the Sacramento Municipal Utility District has been doing it for years. The problem is crowding out any competition in favor of the biggest player.

Read the fine print…SCE customers will realize another rate hike! SCE is already levies the highest energy rate hikes in the industry in California. Now its customers get to pay again. I’m more than all for solar. We as a country desperately need a renewable energy program thats breaks our foreign oil addiction. And we must have the Federal Investement tax credits renewed for green energy, which have failed now 8 times on Capital Hill. However as an SCE customer I don’t understand why we can’t create solar power generation without further 25-30% rate hikes in a huge area of the State that the PUC already allows SCE to overcharge! Go Solar, Not more price hikes for overburdened SCE constituents.

Way to go. That’s will reduce the amount of carbon dioxide emitted into the atmosphere. Also the panels will provide shade for the warehouses thus reducing any airconditioning required. Remember China and the big hydro built over the Three Gorges. They did the right thing despite of all the protests from many places. How much that have replaced the oil and gas required for many years to come.

About Green Wombat

Green Wombat is written by
Todd Woody, a veteran environmental journalist based in California who writes for The New York Times, the Los Angeles Times, Grist and Yale e360. He's one of the few people on the planet who have held a northern hairy-nosed wombat in the wild.

Todd formerly was a senior editor at Fortune magazine, an assistant managing editor at Business 2.0 magazine and the business editor of the San Jose Mercury News.